How the State of CA Convinced Yamaha of America to Stay

Yamaha Corp. of America, the Buena Park subsidiary of the giant Japanese musical instrument and audiovisual equipment maker, agreed to remain in California, rather than move to Texas or Tennessee, after the state granted it a $3 million tax break last month.

The global company, which has operated its U.S. marketing and sales divisions from Orange County since 1971, told California officials it would move out of state without the tax credit.

The incentive, shrinking the company’s corporate tax burden over five years, rewards Yamaha for investing $46 million in a new California campus and boosting its workforce of 350 by another 66 full-time employees.

The average annual salary of the new workers will be $56,400, according to Yamaha’s agreement with Gov. Jerry Brown’s Office of Business and Economic Development, or GO-Biz.

Go-Biz’s California Competes Tax Credit program, enacted in 2013, awarded $243 million in tax breaks this year to encourage businesses to expand or remain in California, up from $200 million last year.

The program was conceived to counter the aggressive efforts of Texas, Nevada, and other states to lure businesses away from the Golden State by offering generous subsidies.

Another large Japanese company, Toyota Motor Sales, is building new headquarters in suburban Dallas, moving 3,000 sales and marketing jobs from Torrance, where it was the city’s largest employer.

Yamaha was evaluating relocating to Texas or Tennessee, according to letters to Go-Biz in September from Assemblywoman Young Kim (R-Fullerton) and Buena Park Mayor Fred Smith.

The elected officials wrote that the company provides “hundreds of high-wage, skilled positions” and asked the state agency to “work with Yamaha to grant approval of their application.”

According to the agreement between Yamaha and Go-Biz, the Japanese conglomerate “certified in its application that absent award of the (tax credit), its project will occur in another state; and, it will terminate all or a portion of its employees in California or relocate all or a portion of its employees in California to another state.”

Asked about Yamaha’s threat to move, Tom Sumner, senior vice president of marketing, acknowledged the company “studied out-of-state options.”

However, he added, “We don’t want to, or in some cases aren’t allowed to, discuss the locations or incentives offered by those locations.”

The $3 million tax credit “makes it more inviting to stay in California which is the place we want to be,” Sumner said. “Our employees love it here.”

Sumner said the company would not release the amount of its overall corporate tax bill. Yamaha’s U.S. revenues in 2015 were $607.6 million, according to Music Trades magazine.

Under the Go-Biz agreement, Yamaha agreed to locate its new campus either in Buena Park, possibly rebuilding on the same site, or in Irvine.

“The building we’re in is almost 50 years old,” Sumner said. “We want to stay in Orange County, but we don’t know where yet.”

Yamaha’s was the largest grant of the $7.7 million in tax breaks given to nine companies for Orange County investments in the November round.

Statewide, 74 businesses were granted $61 million in credits for pledging to invest $670 million and add 6,568 new California jobs between 2015 and 2020.

Among the Orange County beneficiaries, Willdan Group, an Anaheim engineering firm which helps companies and cities become more energy efficient, pledged the second largest investment: $2.7 million.

Willdan, which now has 270 employees, agreed to hire another 100 full-time workers in Anaheim, City of Industry, Fresno and Oakland, at an average salary of $70,000 a year.

Willdan President Michael Bieber said the company’s $845,000 tax credit, spread over five years, “allows us to continue accelerating our investment in our business.”

Unlike the Yamaha agreement, Willdan’s contract with Go-Biz makes no mention of any out-of-state move.

Asked if the firm would have remained in California without a tax incentive, Bieber replied, “No comment.”

Any business can apply to California Competes, but awards are geared toward “industries with high economic multipliers that provide their employees good wages and benefits,” according to Go-Biz.

Other factors: the extent of unemployment or poverty in the area where the business is located, and the incentives available to the business in other states.

The other grantees pledging to create jobs and invest in Orange County over five years include:

• Sequoia Solution LLC, a San Diego County consulting firm to the biotech, pharmaceutical and medical device sectors.

• Go Biz awarded the company a $2.5 million tax credit to invest in computer equipment and expand its current workforce of 42 by 182 full-time employees in Solana Beach, San Francisco, and Orange County.

The 18-employee company agreed to add 22 new hires at average annual salaries over $73,000.

• American Psychiatric Centers, which operates psychiatric clinics, earned a $700,000 tax credit. It pledged to expand in Irvine, Culver City, Sacramento and San Rafael. It will invest $166,000 and grow its workforce to 50 full time employees from 32, at an average annual salary of $150,000.

• Brian Levy, an Irvine financial planner, gained a $125,000 tax credit. He agreed to invest $125,000 and boost his workforce to 8 from 3, at an average annual salary of $36,000.

• PHA Professional Services Inc., a plumbing and HVAC firm in San Clemente, earned a tax credit of $100,000. The firm will invest $475,000 in vehicles and a facility. It will boost its workforce to 14 from 5 at average salaries from $45,000 to $53,000.

• Amy Braun, an Anaheim architect, gained a tax credit of $20,000. She will invest $75,000 in computer equipment and tenant improvements. Her office will grow to six employees from one, with an average annual salary of $40,000.

In the California Competes program, 25 percent of the tax credits available each year are reserved for small businesses.

If a company fails to meet the terms of the agreements, and fails to retain its new hires for at least three years, the tax credits are to be revoked.